Home Health Switch-Up, Don’t Be Late
With the long-awaited conclusion of 2020 behind us, and large-scale vaccine deployment on the horizon, it may be tempting for many to simply celebrate the start of a new year. For business owners and leaders of home health agencies (HHAs) however, it is critical to invest time today into understanding key changes in Medicare payment policies taking effect in 2021.
These changes made by the U.S. Centers for Medicare and Medicaid Services (CMS) affect Requests for Anticipated Payment (RAP) and come in preparation for the 2022 full rollout of the Notice of Admission (NOA) process.[1] With these changes HHAs will see an impact on the timing of their cash flows during 2021, and should prepare accordingly.
Background
Under the Home Health Prospective Payment System, HHAs have historically received split payments from Medicare for episodes / periods of care. Initial payments were made when a RAP was filed at the beginning of a 30-day period of care, with the second payment made at the conclusion of the episode / period of care. This system was operationally beneficial for Medicare as it recorded a beneficiary’s primary HHA in the Common Working File.[2] When RAPs were submitted by HHAs, agencies received 50 or 60% of their payment up front, with the remainder paid at the conclusion of care, providing a tangible cash flow benefit for HHAs.
In 2020 that payment split changed, with existing HHAs[3] receiving 20% up front and 80% at the end of care, and new HHAs receiving 100% of payment at conclusion. Starting in 2021 all HHAs will receive 0% of payment up front, and 100% at conclusion, though RAP filing at the beginning of care is still required, and payment will be docked when the RAP is not filed with 5 calendar days of the start of care. This payment reduction can grow rapidly, as it is equal to a 1/30th reduction of the period payment amount for each day after the start of care date that the RAP is submitted. For instance, a RAP submitted 1 day after the 5-day submission period ends would be considered 6 days late, since penalty calculation is based on the start of care date, and payment would be reduced 20%, absent CMS approved circumstances permitting delayed filing.[4]
HHA RAP Payment Split 2019-2021
What You Need to Know
- HHAs are required to submit RAPs within 5 calendar days of the beginning of care or will face a payment reduction. HHA management teams should ensure that their billing and administrative departments are prepared for this change to minimize potential payment reductions.
- 2021 RAPs will be “no-payment” filings, as the initial 20% of payment received by HHAs upfront in 2020 upon RAP filing has been phased out. Business owners should understand the impact this change will have on cash flow timing and ensure that their companies are prepared to meet working capital needs.
- When a patient’s plan of care requires multiple 30-day periods of care, both the initial and second RAPs can be submitted at the same time to minimize administrative burden.
- This change to RAP policy took effect for all HHAs, both new and existing, on January 1, 2021.
Looking Ahead
- At the end of 2021, HHAs will again need to prepare for the full rollout of the NOA process, which is effective starting January 1, 2022. This change is primarily administrative and will not impact the timing of payment cash flows between 2021 and 2022 as NOAs do not generate upfront payments for care.
We hope you find this industry update helpful in evaluating today’s dynamic environment for companies operating in healthcare services. Please let us know if you have any questions or would like to set up a confidential call or meeting.
[1] The NOA process, still over a year from being implemented, will closely mirror that of the Notice of Election used by hospice providers.
[2] Source: MLN Matters Number: MM11855
[3] Effective dates prior to January 1, 2019
[4] For existing HHAs: Natural disasters or other unusual events damaging the HHA, data filing problems due to CMS systems beyond the HHA’s control, or other circumstances determined by CMS to be outside of the HHA’s control
